Question

At the beginning of the year, Rangle Company expected to incur $59,000 of overhead costs in producing 5,900 units of product. The direct material cost is $25 per unit of product. Direct labor cost is $35 per unit. During January, 550 units were produced. The total cost of the units made in January was:

Answer 1

Answer: Total cost of the units made in January = $38,500

Explanation:

Given that,

At the beginning of the year, overhead costs = $59,000

Units produced at this cost = 5900 units

Direct material cost = $25 per unit

Direct labor cost = $35 per unit

Units produced during January = 550 units

Predetermined overhead rate = $\frac{Total\ expected\ overhead\ cost}{Number\ of\ units}$

= $\frac{59000}{5900}$

= $10 per unit

Now,

Costs incurred in January:

Direct material cost = $25 per unit × 550 units = $13750

Direct labor cost = $35 per unit × 550 units = $19250

Overhead cost = $10 per unit × 550 units = $5500

∴ Total cost of the units made in January = Direct material cost + Direct labor cost + Overhead cost

= 13750 + 19250 + 5500

= $38,500